Relative Prices Across Space and Time-The Production of Commodities by Means of Commodities and Factors

In a subject as vast and intractable as this, it is best to lower one’s sights, or cut one’s losses, right at the beginning, and concentrate on a strictly circumscribed area of feasibility, even though this will leave many crucial problems-and perhaps the crucial problems-outside the purview of the analysis. At the risk of begging the most important question, therefore, I shall simply define an economic system as a sort of black box which absorbs (or swallows up) certain things called ‘inputs’ at one end, and disgorges (or delivers) certain things called ‘yields’ at the other. We prefer the term ‘yield’ to ‘output’, to emphasise the final benefit which the products serve, rather than any reference to their ‘finished’ state, restricting the concept to that part of the flow which becomes available for final consumption, capital formation (physical or human), or defence. I will take it for granted, heroically and unrepentantly, that we can agree on the list of ‘inputs’ and ‘yields’ which economic systems have in common (though they will process them in very different quantities or ‘mixes’) and that, moreover, we are never at a loss in deciding whether a particular item should be classified as one or the other. We therefore absolve ourselves in advance from a number of well known, and probably unresolvable, dilemmas (for example, is ‘work-ethics’ an input or a yield of a system, or is it merely part of the ‘environment’ in which it operates?).